The 49th GST Council Meeting has resolved to change entry at Sl. No. 41A of notification No. 1/2017-Compensation Cess (Rate) so that exemption advantage encompasses both coals reject provided to and by a coal washery, arising out of coal on which compensation cess has been paid and no person has claimed an input tax credit therefore.
Coal Rejects are essentially a by-product of the coal washing or coal beneficiation process, where the rejects are left over as a fraction of raw input coal after the beneficiated washed coal and Middlings have been separated. They are produced by the coal washery process’ coarse circuit.
The Chhattisgarh Authority for Advance Ruling (AAR) ruled, no GST can be charged on washed/rejected Coal from a washery on which Compensation Cess is paid and Input Tax Credit (ITC) is not availed. ( In Re: M/s Sonal K. Mishra CITATION: 2023 TAXSCAN (AAR) 131).
Presently, the exemption is only applicable to rejects that washery supplies are made of coal provided that compensating cess was paid on the raw material and that no one has used the raw material’s input tax credit.
The whole amount of raw coal acquired is subject to a compensatory cess, which principal users like power companies pay before sending the coal to washeries for beneficiation. While rejected coal is sold by the power companies to washeries, washed coal is returned to the power companies.
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Regarding the demand for a compensatory cess on the coal rejects sold by the power companies to the washery, representations were received. In some instances, the power companies have used compensatory cess credit to pay off their debt for coal rejects sent to coal washeries. But, because the electricity provider has used an input tax credit, the washery is unable to benefit from the exemption in this situation.
